September 17, 2014 / 1:33 PM / in 5 years

French welfare fraud costs 20-25 billion euros per year - report

PARIS (Reuters) - Fraud in France’s indebted welfare system costs the country between 20-25 billion euros ($26-32 billion) per year and only a tiny fraction of that amount is ever recovered, an estimate by the French national auditor showed on Wednesday.

Elderly people sit on a bench to take in the sun with their dog along the Promenade Des Anglais in Nice February 19, 2013. REUTERS/Eric Gaillard

Total revenue lost for the social security system had risen by at least 70 percent between 2004 and 2012 due largely to companies not paying social charges for their employees, the Cour des Comptes annual survey showed.

The rate of recovery for money defrauded from benefits ranging from unemployment to pensions was “derisory” - less than one billion euros in 2013, of which 291 million euros from undeclared work, the auditor said.

“There is a need to reinforce the fight against welfare fraud. That involves a professional, team approach using the most modern (detection) techniques as well as reinforced sanctions,” it added.

By one measure, France has the most generous welfare system in the world. The state spends more than 20 percent of GDP on social benefits a year, or more than 500 billion euros.

In 2014 fraud was projected to account for at least twice the welfare system’s deficit, which has fallen amid belt-tightening by President Francois Hollande’s Socialist government and is estimated to reach 9.9 billion euros this year.

The welfate deficit is part of the overall public deficit target of three percent of GDP on which France is measured by the European Commission - which it acknowledged last week it would miss next year.

Successive governments, including former centre-right president Nicolas Sarkozy’s, have balked at implementing tougher anti-fraud measures, which can be politically explosive because they are perceived to target society’s weakest members.

Despite warnings that fraud is inflating the deficit, the government has avoided reinforcing controls on companies or on individuals receiving health or unemployment benefits.

Health Minister Marisol Touraine said the government was instead trying to make savings in the social security budget by cracking down on unnecessary medical treatments.

“The fight against fraud is also important, but it is not the central pillar of my policy because what counts is the determination of the government to bolster or social action,” she told 20 Minutes free newspaper in an interview.

The Cour des Comptes report showed that the building and services sectors cost the most in terms of fraud, while the agricultural sector was virtually un-policed.

Reporting By Jean-Baptiste Vey and Nicholas Vinocur; editing by Mark John

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